Starting from 29 May 2025 a new Energy Law starts to apply in North Macedonia. This new regulatory framework serves for transposition of the Clean Energy Package into the national legislation and introducing major novelties, such as new development process for energy generation and storage capacities, integration of e-mobility to the electricity grid, additional possibilities for development of natural gas and heating networks, etc.
The harmonization of the laws with the Clean Energy Package brings the country one step closer to market coupling with the neighbouring markets and provides various requirements and benefits for the market participants. The focus of this article is on the brand-new rules for development of power plants and energy storage systems due to their game-changing nature for the Macedonian energy industry.
Substantially Redesigned Development Process
Important novelty for the developers and investors is the annual plan for construction of energy facilities (“Annual Plan”) and the manner of issuing authorizations for energy capacities (“Energy Facility Approval”), which includes, among others, the requirement for a bank guarantee or a deposit (“Guarantee”).
Until now, the investors were required to achieve certain stage of development prior to the application for an Energy Facility Approval (e.g. have obtained (preliminary) grid connection consent; applicable environmental approval; etc.), while the Energy Facility Approval was mandatory for obtaining a construction permit.
The published drafts of the Energy Law for public consultations back in January and October 2024, proposed a new approach where the project development would start with the Annual Plan and the Energy Facility Approval. However, with the new Energy Law, there is now a shift towards a combination of both approaches where the projects should initially enter the Annual Plan, while the investors should apply for an Energy Facility Approval after obtaining a construction permit. Similar to the previous legal regime, this will require certain investments and development actions by the investors prior to the obtaining of the Energy Facility Approval, at least with respect to environmental and urban planning matters and depending on the expected amendments to the Construction Law and the other applicable legislation.
Annual Plan
The Government adopts the Annual Plan by the end of each year, with projections for implementation of projects within the following two years. For the preparing of the Annual Plan, the Ministry of Energy, Mining and Natural Resources (“Ministry”) gathers information from all stakeholders (e.g. the Energy Regulatory Commission, competent ministries, the electricity producers, etc.) until 1 November of the ongoing year. The Annual Plan will include energy facilities with installed capacity of and exceeding 1 MW, as well as facilities with installed capacity up to 1 MW which should be first included in the energy plans that will be prepared by the municipalities and approved by the Ministry.
Interested investors have until 1 June to submit an initiative to the Ministry for inclusion of the energy facility into the Annual Plan for the next year. Submitted initiatives until 1 October may be also included in the Annual Plan if the set targets for the specific technology with the Energy Development Strategy of the Republic of North Macedonia and the Integrated National Energy and Climate Plan (“NECP”) are not reached.
2025/2026 Annual Plan
Ongoing projects will be automatically part of the Annual Plan for 2025 if no later than 120 from the entry into force of the Energy Law the respective investor has obtained:
- a construction permit and a grid connection consent from the E-TSO or the E-DSO; or
- an Energy Facility Approval under the previous Energy Law.
These investors may apply for an Energy Facility Approval by 15 November 2025, at the latest.
Since until now there was no obligation for obtaining an Energy Facility Approval and a construction permit for energy storage systems, to include an energy storage facility in the Annual Plan for 2025 the interested investors should file the initiative until 30 September 2025.
The Government should adopt the Annual Plan for 2025 until 31 October 2025 and the Annual Plan for 2026 until 31 January 2026. Interested investors should submit an initiative for including their facility in the Annual Plan for 2026 until 1 October 2025. In addition, in the upcoming period the Ministry should adopt a secondary legislation which will regulate several matters regarding the Annual Plan, including the manner for submitting an initiative.
Energy Facility Approval
The Ministry issues an Energy Facility Approval for construction of power plants, high-efficient combined power and heat power plants (“HCHP”), plants for production of synthetic fuels by way of electricity, plants for production of hydrogen by way of electricity, and electricity storages, for which:
- a procedure for sale or establishing a long-term lease over a state-owned land is required;
- the plan is to build the energy facility on a privately owned land, based on a prior request from the investor;
- a public private partnership agreement is awarded;
- a concession for goods of general interest is awarded;
- there is a separate law for implementation of the construction of the facility.
There are several exemptions or specifics for each of the abovementioned scenarios (e.g. if the facility has planned installed capacity of less than 1 MW and should be built on privately owned land or it will be used only for own purposes, etc.) and some of the abovementioned cases do not apply to all types of facilities (e.g. a concession for goods of general interest is not applicable for HCHPs; the installed capacity of the power plant is not relevant when it comes to PPPs and concessions; etc.).
To obtain an Energy Facility Approval, in addition to the requirement the energy facility to be included in the Annual Plan, the investor should also undertake all development steps for ensuring completion of the procedure for issuing a construction permit. The obtained construction permit will become final and binding once the Energy Facility Approval is issued.
The Energy Facility Approvals for new facilities for production of heat or increase of the installed capacity of such facilities, which are planned for areas that are not part of an Annual Plan, will be issued on municipal level after (i) awarded PPP agreement or (ii) upon request if the installed capacity is up to 1 MW. The facility’s technology must be included in the NECP.
The validity term of the Energy Facility Approval will be up to 15 years and the investor must follow the implementation plan submitted to the Ministry, otherwise the Energy Facility Approval will cease to be valid. Upon request and subject to certain requirements, the investor may transfer the Energy Facility Approval to a third party.
Requirement for Guarantees
The applicant for an Energy Facility Approval must provide to the Ministry a Guarantee in the amount of EUR 25,000 per planned MW of installed capacity of the power plant/the electricity storage facility. Unless it is a deposit, the Guarantee should be from a local commercial bank as a first demand guarantee, which is non-transferable, irrevocable and unconditional, with a validity period of five years.
The Ministry returns the Guarantee if the investor reached the phase of performance testing. All other requirements regarding the submission, the return and enforcing of the Guarantee will be regulated by a separate rulebook on Energy Facility Approvals.
In the meantime, the previous draft of the Energy Law can serve as a hint, where it was anticipated that the Ministry may collect 5% of the Guarantee’s value if the applicant withdraws prior to the issuance of the Energy Facility Approval and enforce the entire Guarantee if the investor fails to:
- start with construction works (the deadline under the Construction Law is two years from the final and binding construction permit);
- build the facility within the deadline from the Energy Facility Approval;
- extend the validity term of the Guarantee no later than 60 days prior to the expiry of the term.
Energy Storage
The new Energy Law allows projects for standalone energy storage, generation paired with energy storage, as well as storages as fully integrated grid components to the transmission or the distribution system. In case of co-located energy storage, an Energy Facility Approval is required only if the installed capacity of the power plant is or exceeds 1 MW.
In addition, it is explicitly regulated that the co-located energy storage with installed capacity up to 40% of the power plant’s installed capacity is considered as integrated system to the power plant for storage of electricity and the producer may use it for storing the produced electricity and/or the taken electricity from the grid, and deliver electricity to the grid in accordance with the approved maximal peak power of the power plant’s connection.
However, the most important novelty in this regard is the requirement all new solar and wind power plants to have co-located electricity storages with installed capacity of 20% of the power plant’s installed capacity. The storage system must be capable of charging and discharging at maximum power capacity for a minimum duration of two hours.
There are certain contradictions with the Construction Law which will have to be aligned regarding the co-located storages, but in the meantime, based on the latest changes to the Construction Law:
- construction permit (Ministry of Transport or competent municipality) is required for standalone electricity storage projects, categorized as first (over 1 MW) or second (under 1 MW) category facilities, based on installed capacity.
- decision for facilities not subject to a construction permit (competent municipality) is required for electricity storage systems, regardless of capacity, that are integrated within and exclusively serve existing RES generation facilities.
Renewable Energy Sources
Currently, the RES power plants and RES heating plants are considered as facilities of public interest which enabled faster expansion of the RES capacities in North Macedonia. This beneficial regime is not available under the new Energy Law.
As a comparison, one of the previous drafts of the new Energy Law imposed certain requirements in order to classify one RES facility as a facility of public interest which would have limited the number of facilities which can be developed on state-owned land through direct agreements and without public bidding. The new Law on Renewable Energy Sources should clarify whether the current approach will be entirely abandoned or certain projects will still be able to benefit from a public interest status under the sector-specific regulation.
In the meantime, the Law on Expropriation still provides public interest status for construction of RES power plants and we will have to wait and see whether this would be sufficient for the authorities to continue to enter into direct agreements for establishing long-term lease over state-owned land without bidding procedures.
In general, the current incentive support schemes remain in place, while the announced Contract for Difference mechanism will probably require certain changes to the regulatory framework.
To wrap up
The adoption of the new Energy Law represents a significant progress in the started restructuring of the Macedonian institutional and regulatory energy setup, which started with the last year’s establishing of the separate Ministry. It will be also crucial to have the secondary legislation in place as soon as possible, as well as the aligning with the other laws, in order to avoid any delays in the construction of larger generation and storage capacities.
For the investors who have or are planning investments in energy facilities in North Macedonia, it is important to timely prepare the necessary initiatives for inclusion of their projects in the Annual Plan and the potential applications for an Energy Facility Approval. Therefore, it’s imperative that investors begin analyzing the new regime without delay, to optimize investment timing, minimize costs and more importantly not be outrun by competing projects.
By Kiril Papazoski, Legal Director, and Bozhidar Miloshevikj, Attorney At Law, PwC / Papazoski and Mishev Law Firm, an independent law firm in cooperation with PwC.
